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ACQUISITIONS

6 Months Ended

Jun. 30, 2022

NOTE 2 – ACQUISITIONS

On July 22, 2021, the Company entered into the Merger Agreement with Teton, parent company of Rocky Mountain Bank, a Wyoming-chartered bank headquartered in Jackson, Wyoming. The Merger Agreement provided that, subject to the terms and conditions set forth in the Merger Agreement, Teton would merge into the Company, with the Company continuing as the surviving corporation. The Merger Agreement also provided that following the merger, Rocky Mountain Bank would merge with and into the Bank, with the Bank surviving the bank merger. The transaction closed on December 31, 2021 with an aggregate purchase price of $51.3 million. As part of its long-term growth strategy, the Teton Acquisition expands First Western’s presence in Wyoming and allows the Bank to deliver its unique approach to private and commercial banking to more clients in the region.

The Teton Acquisition was accounted for under the acquisition method of accounting and therefore all assets and liabilities were measured and recorded at their provisional fair values as of the acquisition close date of December 31, 2021 with final measurement period adjustments made as of March 31, 2022. All non-equity acquisition related costs were expensed as incurred. Certain acquisition costs related to the issuance of equity were capitalized as of December 31, 2021. Market value adjustments for assets acquired and liabilities assumed were amortized or accreted on a level yield basis over the estimated life of the asset or liability. Loans acquired were recorded at their estimated fair value and therefore no allowance for loan and lease losses was recorded at the date of acquisition. Goodwill of $6.2 million, which is not tax deductible, was recognized in the transaction and represents expected synergies and cost savings resulting from combining the expanded footprint and expertise of the associates. Additionally, core deposit intangible assets were identified and recorded at their estimated fair values and are amortized over their estimated useful life. On August 31, 2021, the Company completed the issuance and sale of subordinated notes, which provided partial funding of the transaction. See Note 8 – Borrowings for more information.

The following presents the estimated fair values of the assets acquired and liabilities assumed in the transaction with Teton as of December 31, 2021, including all measurement period adjustments to the provisional estimates (dollars in thousands):



	Provisional		Measurement Period		December 31,
Fair value of consideration transferred	Estimates		Adjustments		2021
Cash consideration	$	11,501	$	—	$	11,501
Common stock issued		39,818		—		39,818
Total fair value of consideration transferred		51,319		—		51,319

Assets acquired
Cash and cash equivalents		132,498		—		132,498
Available-for-sale securities, at fair value		18,058		—		18,058
Correspondent bank stock, at cost		928		—		928
Mortgage loans held for sale		840		—		840
Loans		252,275		(857)		251,418
Premises and equipment		17,758		—		17,758
Accrued interest receivable		923		—		923
Accounts receivable		95		—		95
Other receivable		520		—		520
Core deposit intangible⁽¹⁾		1,264		698		1,962
Other assets		226		242		468
Assets held for sale		115		5		120
Total assets acquired		425,500		88		425,588

Liabilities assumed
Deposits		379,227		(29)		379,198
Accrued interest payable		26		—		26
Other liabilities		1,283		—		1,283
Deferred tax liabilities/(assets), net		42		(71)		(29)
Total liabilities assumed		380,578		(100)		380,478
Net assets acquired		44,922		188		45,110
Goodwill recognized	$	6,397	$	(188)	$	6,209

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⁽¹⁾ The core deposit intangible was determined to have an estimated life of 10 years.

The Company incurred $0.3 million and $0.9 million in expenses related to the acquisition during the three and six months ended June 30, 2022, respectively. The following presents the acquisition expenses within Non-interest expense of the Condensed Consolidated Statements of Income as of the date noted (dollars in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2022		June 30, 2022
Mergers and acquisitions expense:
Salaries and employee benefits	$	152	$	381
Professional services		274		386
Technology and information systems		4		4
Data processing⁽¹⁾		(93)		22
Marketing		5		75
Other		5		6
Total mergers and acquisitions expense	$	347	$	874

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⁽¹⁾ Includes credit for avoided contract termination costs due to new contract terms.

The following table presents pro forma information for the three and six months ended June 30, 2022 and 2021, as if the Teton Acquisition had occurred on January 1, 2021. This table has been prepared for comparative purposes only, and is not indicative of the actual results that would have been attained had the acquisitions occurred as of the beginning of the periods presented, nor is it indicative of future results (in thousands, except per share data):



		Pro Forma
		Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net interest income after provision for loan losses	$	19,619	$	16,755	$	37,693	$	33,211
Non-interest income		6,940		10,039		15,540		21,359
Net income		4,482		10,736		10,006		14,392
Pro forma earnings per share:
Basic		0.47		1.15		1.06		1.54
Diluted		0.46		1.12		1.03		1.51